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Commerce,  the  Commission  and  the  Courts 


A  Lecture  delivered  under  the  auspices 
of  the  College  of  Arts  and  Sciences 


At  Cornell  University 
May  13,  1912 

By  ' 

Logan  G,  McPherson 

Lecturer  on  Transportation  at  the  Johns  Hopkins  University 
Director  of  the  Bureau  of  Railway  Economics'  ' 


WASHINGTON,  D.  C, 
1912 


2^o 


c< . 


1 
I 


Commerce,  the  Commission  and  the  Courts. 

With  the  utilization  of  steam  came  that  development  under  which 
a  stationary  steam  engine  transmits  power  through  belts  and  wheels 
enabling  the  simultaneous  working  of  varied  machinery  in  ever  more 
specialized  manufacture.  With  the  utilization  of  steam  came  the  loco- 
motive which  has  given  a  new  significance  to  the  transportation  of 
persons  and  of  the  things  which  people  use.  The  stationary  engine 
and  the  locomotive  brought  the  great  modern  mill  and  factory,  the 
trend  of  the  population  to  the  cities,  the  large  scale  operations  that 
have  enhanced  the  differentiation  between  employer  and  employee  and 
have  accelerated  the  segregation  of  capital.  The  tremendous  eco- 
^  nomic  changes  have  brought  about  changes  and  are  bringing  about 
^'  still  other  changes  in  the  law  of  the  land. 

Y      But  these  economic  changes  in  the  ramification  of  their  effect  are 

X^  not  yet  understood,  and  therefore  it  is  not  yet  known  just  what  should 

wClie  the  adjustment  of  the  law  necessary  to  promote  wholesome  eco- 

j.'->  nomic  progress.     For  instance,  when  the  Sherman  Anti-Trust  Law 

--^  was  under  discussion  in  the  Senate  a  Senator  remarked  that  it  was  a 

(4  measure  which  nobody  wanted,  nobody  understood,  but  everybody  was 

i^;!^^oing  to  vote  for.    That  law  remained  on  the  statute  books  for  twenty- 

"j  one  years  before  anybody  had  a  definite  idea  of  just  what  it  meant.    It 

»   needed  a  decision  of  the  Supreme  Court  to  give  it  vitality  and  even 

'^s  now  vitalized  a  large  measure  of  uncertainty  attends  its  application. 

In  no  respect  is  there  greater  uncertainty  than  in  the  attempt  to 

vj^djust  the  law  to  the  function  of  transportation.     This  question  has 

many  aspects,  but  that  of  most  importance  both  to  the  railways,  which 

'are  the  principal  agencies  of  transportation  in  this  country,  and  to  the 

public  concerns  the  rates  which  shall  be  charged  for  transportation, 

and  especially  for  the  carriage  of  freight.     The  revenue  upon  which 

the  railroads  depend  for  existence  is  determined  in  large  measure  by 

"^  the  rates  which  they  charge,  the  volume  of  traffic  being  the  other 

R  factor.    As  the  rates  applying  to  a  shipment  are  higher  or  lower  the 

«:  profits  of  a  producer  or  a  dealer  are  as  a  rule,  other  conditions  equal, 

^  lower  or  higher. 

'>i      When  the  railroads  came  into  existence  they  were  as  a  matter  of 


^  35837 


course  subject  to  the  existing  law.  A  most  important  part  of  the 
common  law  is  that  which  relates  to  property,  the  rights  to 
property,  the  conditions  under  which  property  may  be  held  and  trans- 
ferred. The  right  to  the  use  and  enjoyment  of  property  lawfully 
held  is  one  of  the  fundamental  rights  guaranteed  to  the  American 
citizen  by  the  Constitution  of  the  United  States  and  the  law  of  the 
land.  The  railways  in  the  United  States  are  private  property  and  as 
such  those  who  hold  title  to  them  are  entitled  to  their  use  as  property 
and  are  entitled  to  be  protected  in  that  use  by  the  law  and  the  Govern- 
ment. 

It  is  also  true  that  the  railways  are  "affected  with  a  public  use."  It 
is,  because  of  the  public  nature  of  their  services  that  the  railroads  were 
accorded  the  power  of  eminent  domain  which  almost  continuously  has 
been  referred  to  as  the  reason  that  they  should  be  subject  to  public 
regulation.  It  ought  to  be  recognized,  however,  that  the  real  basis 
for  this  regulation  is  the  economic  power  of  the  railways  which  was 
not  foreseen  when  the  original  charters  were  granted.  The  distinction 
between  the  private  rights  and  the  public  obligations  of  a  railway 
have  not  even  as  yet  been  definitely  and  finally  determined. 

So  recently  as  October,  1876,  the  Supreme  Court  of  the  United 
States  in  Lake  Superior  &  Mississippi  Railroad  Company  vs.  United 
States;  and  Atchison,  Topeka  &  Santa  Fe  Railroad  Company  vs. 
United  States  (United  States  Reports,  Supreme  Court,  Volume  93, 
p.  442),  held  that  the  act  of  Congress  providing  that  a  railroad  shall 
be  "a  public  highway  for  the  use  of  the  nation  of  the  United  States, 
free  from  all  toll  or  other  charges,  for  the  transportation  of  any 
property  or  troops  of  the  United  States,"  decrees  to  the  Government 
the  free  use  of  the  road  only  and  not  of  the  rolling  stock  or  other 
personal  property  of  the  company.  Still  later — October  2d,  1883 — it 
is  declared  in  a  Pennsylvania  case  (Pierce  vs.  Commonwealth,  104 
Pa.,  150,  155,  13  Am.  &  Eng.  Cas.,  74,  79,  per  Gordon,  J.,  citing  Pres- 
byterian Society  vs.  Auburn  &  Rochester  Railroad  Company,  3  Hill 
(N.  Y.)  that  "A  railroad  company  is  not  public,  nor  does  it  stand  in 
the  place  of  the  public ;  it  is  but  a  private  corporation  over  whose  rails 
the  public  may  travel  if  it  chooses  to  ride  in  its  cars.  Indeed,  we  re- 
gard it  as  a  misnomer  to  attach  even  the  name  'quasi-public  corpora- 
tion' to  a  railroad  company,  for  it  has  none  of  the  features  of  such  cor- 
porations, if  we  except  its  qualified  right  of  eminent  domain,  and  this 


is  because  of  the  right  reserved  in  the  public  to  use  its  way  for  travel 
and  transportation.  Its  officers  are  not  public  officers,  and  its  business 
transactions  are  as  private  as  those  of  a  banking  house.  Its  road  may 
be  called  a  quasi-public  highway,  but  the  company  itself  is  a  private 
corporation  and  nothing  more." 

It  was  the  intent  of  the  founders  of  this  Government  that  the  indi- 
vidual citizen  have  the  utmost  possible  liberty,  that  his  activities  be 
limited  only  by  trespass  upon  the  equal  rights  of  others.  To  the  prop- 
erty holder  was  guaranteed  his  right  to  the  use  of  his  property  subject 
to  this  limitation. 

The  railroads  of  the  United  States  were  regarded  as  private  prop- 
erty subject  to  the  law  of  the  common  carrier,  and  they  were  so  ad- 
ministered as  private  property.  In  the  sale  of  transportation  they  re- 
sorted to  practices  that  are  still  common  among  those  engaged  in  other 
branches  of  commerce.  They  adjusted  rates  to  markets,  to  competition, 
to  the  pressure  of  shrewd  and  effective  buyers  just  as  the  manufacturer 
or  the  wholesale  merchant  still  adjusts  his  prices  to  markets,  to  com- 
petition, to  the  pressure  of  shrewd  and  effective  buyers.  The  railroads 
gave  rebates  and  cut  rates  as  manufacturers  and  merchants  still  give 
rebates  and  cut  prices.  They  charged  less  to  and  from  places  where 
there  was  effective  competition  just  as  manufacturers  and  merchants 
still  charge  less  for  their  goods  where  there  is  effective  competition 
than  where  such  competition  does  not  exist. 

As  producers  and  distributors  strove  to  extend  the  area  of  their 
markets  and  competition  reduced  their  margins  of  profit  the  railroad 
rate,  especially  that  applied  to  the  coarser  and  heavier  staples  of  com- 
merce, became  more  and  more  a  factor  in  determining  what  markets  the 
various  producers  and  distributors  could  enter.  As  industry  and  com- 
merce developed,  complaints  increased  of  discrimination  made  by  the 
railroads  between  persons,  between  localities,  and  between  commodi- 
ties. These  complaints  in  various  cases  were  more  or  less  well  founded, 
but  the  truth  is  that  they  arose  in  the  main  from  that  process  of 
adjustment  entailed  by  the  extension  and  ramifications  of  the  channels 
of  trade,  an  adjustment  which  is  still  in  process.  There  was  discom- 
fiture because  of  the  loss  of  large  amounts  that  had  been  invested  in 
railroad  construction,  and  there  was  bitterness  of  feeling,  frequently 
justified,  against  promoters,  speculators,  and  manipulators.  The  agi- 
tation led  to  the  enactment  of  the  Interstate  Commerce  Act  in  1887, 


the  first  measure  of  Federal  regulation  and  which  was  based  on  that 
clause  of  the  Constitution  authorizing  Congress  to  regulate  commerce 
between  the  States.  The  intent  of  that  act  was  simply  to  apply  by 
Federal  statute  to  interstate  commerce  the  principles  of  the  common 
law  which  applied  in  the  separate  States,  and  which  there  applied  to 
both  interstate  and  intrastate  commerce;  to  abolish  rebates,  secretly 
cut  rates,  and  other  stealthy  devices  for  securing  traffic;  to  prohibit 
unjust  discrimination  between  persons,  places  and  commodities. 

It  is  to  be  noted  that  the  agitation  against  the  railways  came  in 
greatest  measure  from  shippers  and  communities  of  lower  economic 
strength  who  were  being  worsted  in  the  competitive  struggle.  They 
sought  the  aid  of  legislatures  to  obtain  that  which  they  could  not 
obtain  for  themselves  with  their  measure  of  ability  and  under  the  con- 
ditions which  beset  them.  The  essence  of  the  complaint  was  not  that 
the  railways  contravened  their  public  duties  by  stifling  traffic,  but 
that  in  the  struggle  for  existence  which  is  what  free  competition  means 
they  favored,  as  they  were  forced  to  favor,  those  having  economic 
strength  against  those  who  were  economically  weak.  The  outcry  in 
its  earlier  stages  was  against  secret  and  underhand  discrimination.  In 
this  it  was  quite  justified  and  it  would  seem  that  but  little  of  such  dis- 
crimination remains. 

The  Interstate  Commerce  Commission  has  stated  that  it  could  not 
undertake  to  equalize  the  natural  disadvantages  of  shippers  and  of  com- 
munities. However,  a  member  of  the  Commission  once  said  that  it 
had  been  established  to  protect  the  people  against  the  railways.  Al- 
though it  is  coming  more  and  more  to  recognize  that  its  duty  is  that 
of  an  arbiter  between  the  shippers  and  the  railways,  there  is  hardly 
any  doubt  that  the  vast  majority  of  the  people  regard  it  as  an  insti- 
tution created  primarily  to  curb  the  railways.  It  is  sometimes  claimed 
that  the  railways  are  monopolies  and  as  such  that  their  rates  should 
be  controlled  by  a  body  acting  on  behalf  of  the  public.  That  the  rail- 
roads should  be  prevented  by  public  authority  from  charging  excessive 
and  extortionate  rates  is  not  to  be  denied.  To  but  a  partial  extent, 
however,  are  they  a  monopoly  and  the  phase  of  monopoly  seldom 
enters  into  the  complaints  that  are  brought  before  the  Commission. 
Nearly  all  of  these  complaints,  especially  those  of  importance,  are  of 
rates  originally  made  by  the  railways  and  usually  under  stress  of  com- 
petition, but  which  do  not  satisfy  all  of  the  shippers. 


Under  the  Constitution  and  the  law  of  this  land,  the  ultimate  de- 
termination of  a  question  involving  a  property  right  rests  with  the 
courts.  To  change  this  would  be  to  change  not  only  the  law  but  the 
Constitution.  The  law  may  be  changed  by  enactment  but  only  within 
the  limits  prescribed  by  the  Constitution.  The  Constitution  itself  may 
be  changed,  but  only  through  procedure  that  especially  has  been  de- 
creed in  order  that  such  a  change  may  not  be  made  without  the  most 
thorough  discussion  and  registration  of  the  matured  consent  of  the 
people. 

When  the  Interstate  Commerce  Commission  was  established  there 
began  the  so-called  conflict  between  the  Commission  and  the  courts. 
Many  of  the  early  decisions  of  the  Interstate  Commerce  Commission 
were  resisted  by  the  railroads  and  many  of  these  decisions  were  over- 
ruled by  the  United  States  Supreme  Court.  As  an  advocate  of  the 
people  it  was  not  unnatural  for  the  Commission  to  fall  into  errors  in 
the  capacity  of  an  arbiter  between  the  people  and  the  railroads,  even 
to  make  mistakes  in  the  law  not  because  of  any  lack  of  ability  or 
honesty  on  the  part  of  the  Commission,  but  because  the  inability  on 
the  part  of  an  advocate  to  see  both  sides  of  the  question  is  a  trait  of 
human  nature.  The  railroad  managers,  not  without  sanction  from  the 
courts,  as  evidenced  by  the  decisions  which  have  been  quoted,  had  a  con- 
ception of  their  rights  upon  which  the  Interstate  Commerce  Commission 
seemed  to  encroach.  Although  the  railroads  obeyed  90  per  cent  of  the 
formal  orders  made  by  the  Commission,  they  steadily  resisted  its  en- 
croachments, while  the  members  of  the  Commission,  not  satisfied  with 
the  measure  of  their  authority,  as  steadily  pressed  for  an  increase  of 
power.  The  Commission's  zeal  in  advocacy  and  the  natural  human 
resentment  of  interference  led  it  to  be  exceedingly  unfriendly  to  ju- 
dicial control.  The  early  annual  reports  of  the  Commission  contained 
numerous  criticisms  of  the  courts,  even  of  the  Supreme  Court  and 
many  of  them  most  severe.  This  use  by  the  Commission  of  its  annual 
report  as  an  organ  of  public  criticism  of  the  courts  has  continued  to 
the  present  although  the  courts  by  the  nature  of  their  functions  are 
prohibited  from  making  reply  to  such  criticism  or  engaging  in  public 
discussion  of  the  cases  that  come  before  them. 

Public  sentiment,  almost  invariably  against  the  railroads,  led  to  the 
enactment  of  the  further  Federal  legislation  which  has  given  the 
Interstate  Commerce  Commission  enlarged  power  over  the  interstate 


8 

railroads  of  the  country.  It  has  prescribed  the  system  of  accounts  to 
be  used  by  the  railroads,  the  standard  of  safety  appliances,  rules  for 
demurrage,  for  this,  that  and  the  other  thing.  The  railroads  unques- 
tionably have  been  forced  to  do  things  that  they  ought  to  have  done 
of  their  own  volition,  but  which  were  not  done  sometimes  for  lack 
of  funds,  sometimes  for  lack  of  foresight,  and  sometimes  because  of 
lack  of  accord  between  the  administrators  of  various  roads.  The 
drastic  features  of  some  enactments  would  have  been  avoided  had 
railroad  managers  always  exercised  the  spirit  of  forbearance  and  com- 
promise. 

In  accordance  with  their  importance  cases  in  the  ordinary  course  of 
litigation  may  be  appealed  from  a  lower  to  a  higher  court,  and  most 
cases  of  Federal  concern  may  be  appealed  ultimately  to  the  Supreme 
Court  of  the  United  States. 

The  expression  "appeal"  is  used  when  a  case  is  taken  from  a  lower 
court  to  a  higher  court.  The  Interstate  Commerce  Commission  is  not 
a  court,  but  none  the  less  its  decisions  affect  the  rights  of  property  and 
therefore  a  party  thereto  cannot  be  debarred  from  having  such  a  de- 
cision passed  upon  ultimately  by  the  courts.  The  Constitution  pro- 
vides, however,  that  except  in  a  few  classes  of  cases  of  peculiar 
nature  a  cause  cannot  be  heard  first  in  the  Supreme  Court.  It  must 
come  to  it  on  appeal  from  a  lower  court. 

As  the  Interstate  Commerce  Commission  is  not  a  court,  the  taking 
of  one  of  its  decisions  into  a  court  is  not  designated  as  an  appeal; 
the  case  is  taken  from  the  Commission  to  the  Court  for  "review"  by 
the  Court.  It  was  originally  provided  in  the  Interstate  Commerce 
Law  that  the  decisions  of  the  Commission  should  be  subject  to  review 
by  the  United  States  Circuit  Courts.  Appeal  would  lie  from  the 
United  States  Circuit  Court  to  the  United  States  Supreme  Court. 

There  have  been  those  who  would  deny  to  the  courts  the  right  to 
review  the  decisions  of  the  Commission.  Although  this  right  of  re- 
view was  discussed  in  Congress  during  the  debate  on  the  Hepburn 
Bill,  it  is  obvious  that  it  cannot  be  denied. 

It  has  been  enacted  that  the  courts  have  no  jurisdiction  to  review  the 
wisdom  or  expediency  of  the  views  or  action  of  the  Commission 
within  the  limits  of  its  administrative  function.  However,  the  Su- 
preme Court  has  said,  "Beyond  controversy,  in  determining  whether  an 
order  of  the  Commission  shall  be  sustained  or  set  aside,  we  must 


consider  (a)  All  relevant  questions  of  constitutional  power  or  right; 
(b)  All  pertinent  questions  as  to  whether  the  administrative  order  is 
within  the  scope  of  the  delegated  authority,  under  which  it  purports 
to  have  been  made;  and  (c)  A  proposition  which  we  state  inde- 
pendently, although  in  its  essence  it  may  be  contained  in  the  previous 
ones,  viz.,  whether  even  although  the  order  be  in  form  within  the 
delegated  power,  nevertheless  it  must  be  treated  as  not  embraced  there- 
in, because  the  exertion  of  authority  which  is  questioned  has  been 
manifested  in  such  an  unreasonable  manner  as  to  cause  it  in  truth  to  be 
within  the  elementary  rule  that  the  substance,  and  not  the  shadow 
determines  the  validity  of  the  exercise  of  the  power." 

To  expedite  the  trial  of  cases  brought  into  the  United  States  Circuit 
Court  after  decision  by  the  Interstate  Commerce  Commission ;  in  order 
that  such  cases  might  have  the  consideration  of  a  court  that  should 
gain  increasing  experience  with  the  problems  of  trafific  and  in  the 
application  of  the  law  as  related  to  them,  the  Congress  established  the 
Commerce  Court  to  review  cases  brought  from  the  Interstate  Com- 
merce Commission. 

As  the  Commerce  Court  which  has  no  powers  other  than  those 
formerly  possessed  by  the  United  States  Circuit  Court,  and  whose 
judges  rank  as  did  the  judges  of  the  United  States  Circuit  Court, 
has  been  made  the  court  in  which  reviews  of  the  decisions  of  the 
Interstate  Commerce  Commission  are  concentrated,  it  follows  that 
the  long  continued  conflict  between  the  Interstate  Commerce  Com- 
mission and  the  Courts  has  now  become  primarily  a  conflict  between 
the  Interstate  Commerce  Commission  and  the  Commerce  Court. 

The  Commerce  Court  has  probably  rendered  no  greater  proportion 
of  decisions  adverse  to  the  Commission  than  have  the  Circuit  Courts 
or  the  Supreme  Court  if  there  be  taken  the  entire  record  from  the 
organization  of  the  Commission.  It  must  be  borne  in  mind  that  ordi- 
narily the  orders  of  the  Commission  are  complied  with.  It  is  only 
when  the  counsel  for  the  railroad  companies  feel  satisfied  that  they 
can  clearly  demonstrate  error  on  the  part  of  the  Commission  that  they 
take  a  case  to  court.  Therefore  it  may  not  be  a  cause  of  surprise  that 
in  a  considerable  number  of  these  cases,  which  involve  but  a  very 
small  proportion  of  the  orders  of  the  Commission,  the  Court  should 
find  that  the  Commission  had  committed  errors  that  invalidated  its 
orders.    This  is  only  to  be  expected  because  of  that  human  fallibility 


10 

from  which  members  of  the  Interstate  Commission  are  not  exempt. 

The  crucial  point  is  whether  the  Court  can  determine  no  more  than 
that  the  decisions  of  the  Commission  have  been  or  have  not  been 
within  the  statutes  which  specify  its  authority  and  therefore  is  pro- 
hibited from  examining  the  questions  of  fact  on  which  the  Commis- 
sion has  based  its  decisions ;  or  whether  the  Court  to  ascertain  whether 
the  authority  of  the  Commission  has  been  manifested  in  a  reasonable 
manner  is  entitled  to  make  its  own  examination  of  the  facts.  The 
decision  of  the  United  States  Supreme  Court  upon  this  point  is  now 
being  awaited. 

Certain  differences  in  the  point  of  view  of  the  Interstate  Commerce 
Commission  and  that  of  the  Commerce  Court  may  be  brought  out  by 
a  brief  survey  of  a  few  of  the  decisions  of  the  Commission  whi.:h 
have  not  been  sustained  by  the  Court. 

It  is  the  practice  of  the  railways  to  build  or  to  permit  to  be  built 
from  their  tracks  to  a  large  commercial  or  industrial  plant  what  is 
known  as  an  industrial  track,  or  sometimes  colloquially  as  a  private 
siding.  Over  such  a  track  freight  cars  are  moved  by  the  railway  to 
the  industrial  or  commercial  plant  into  whose  receptacles  their  con- 
tents are  directly  unloaded,  the  time  and  expense  of  conveyance  from 
the  railway  station  by  dray  or  truck  thereby  being  saved.  In  the  more 
densely  settled  East  it  has  become  customary  by  reason  of  compet'.tion 
and  other  causes  that  in  most  of  the  larger  cities  the  railways  haul 
the  cars  over  the  private  siding  to  the  plant  of  the  consignee,  and 
take  cars  from  the  plant  of  the  consignee  to  its  own  track  without 
charging  for  this  service  other  than  the  rate  that  applies  to  and  from 
the  railway  terminal  on  a  shipment  over  a  considerable  distance.  In 
the  State  of  California  whose  population  all  told  is  about  the  same  as 
that  of  the  City  of  Chicago  the  railways  serving  San  Francisco  and 
Los  Angeles  have  made  a  charge  of  $3.50  per  car  for  haulage  o\pr 
the  private  siding  between  the  railway  track  and  the  industrial  plant. 
This  charge  for  many  years  has  been  a  cause  of  contention.  The  Inter- 
state Commerce  Commission  held  that  such  service  was  part  of  the 
terminal  service  which  should  be  performed  by  the  railways  without 
extra  charge  and  it  ruled  that  they  should  desist  from  exacting  the 
charge  of  $2.50  per  car  when  such  carload  freight  is  moving  in  inter- 
tate  commerce  incidentally  to  a  system  line  haul.  The  railways  took 
the  case  to  the  Commerce  Court,  which  held  that  the  railways  are 


11 

bound  only  to  carry  freight  to  the  station  to  which  freight  may  be 
consigned  or  from  which  it  may  be  shipped,  that  upon  the  facts  pre- 
sented it  comes  to  a  conclusion  different  from  that  reached  by  the 
Commission ;  that  the  real  question  is  whether  the  railway  is  lawfully 
entitled  to  make  the  charge  for  the  service  in  question.  The  Court 
held  that  "if  the  carrier  is  not  bound  by  law  to  deliver  freight  at  the 
industrial  plant,  and  it  cannot  be  successfully  contended  that  it  is, 
then  it  follows  as  a  necessary  consequence  that  this  industrial  track 
service  is  a  special  service  and  is  not  a  service  which  the  carrier  is 
bound  to  perform  for  the  general  tariff  charge  for  the  transportation 
of  freight  destined  to  Los  Angeles." 

In  another  case  the  Interstate  Commerce  Commission  set  aside  the 
rate  of  $1.05  per  100  pounds  for  the  transportation  of  less  than  car- 
load shipments  of  boots  and  shoes  from  Boston  and  New  York  to 
Atlanta,  Ga.,  ruling  that  a  rate  exceeding  95  cents  per  100  pounds 
was  unreasonable,  unjust,  and  unduly  discriminatory.  The  Com- 
merce Court  said,  "By  the  plain  language  of  the  law  the  power  of 
the  Commission  to  prescribe  a  rate  for  the  future  cannot  be  exercised 
unless  after  full  hearing  on  complaint  made  it  shall  be  of  the  opinion 
that  any  of  the  rates  or  charges  whatsoever  demanded,  charged,  or 
collected  by  any  common  carrier  or  carriers  subject  to  the  provisions  of 
the  act  *  *  *  are  unjust  or  unreasonable,  or  unjustly  discrimina- 
tory, or  unduly  preferential  or  prejudicial,  or  otherwise  in  violation 
of  the  provisions  of  the  act."  The  Court  goes  on  to  say,  "The  word 
'opinion'  must  be  interpreted  with  reference  to  the  connection  in  which 
it  is  used  in  the  law.  It  is  only  after  full  hearing  upon  complaint  made 
that  the  law  gives  any  weight  or  significance  to  the  opinion  of  the 
Commission;  that  is,  it  is  only  when  the  opinion  results  from  a  full 
hearing  that  it  can  be  used  as  the  basis  of  further  action  by  the 
Commission.  It  is  true  that  in  making  up  the  opinion  of  the  Com- 
mission its  members  may  and  it  is  their  duty  to  call  to  their  aid  their 
knowledge  and  experience,  but  if  Congress  had  intended  that  the 
Commission  could  make  up  its  opinion  from  the  knowledge  and  ex- 
perience of  its  members  independent  of  the  evidence  in  the  particular 
case,  then  it  was  idle  to  provide  for  a  full  hearing,  as  an  opinion  of 
the  Commission  could  be  formed  as  well  without  as  with  the  full 
hearing.  A  full  hearing  not  only  means  an  opportunity  to  be  heard 
by  the  carrier,  but  an  investigation  by  the  Commission  itself  of  the 


12 

lawfulness  of  the  rate  in  question."  The  Court  holds  the  allegation 
that  there  was  no  such  evidence  offered,  heard  or  introduced,  to  be 
an  allegation  of  fact ;  that  is  that  no  evidence  was  offered  to  the  Com- 
mission to  sustain  the  finding  of  the  Commission. 

In  another  case,  the  Commission  had  ordered  a  reduction  in  rates  from 
New  Orleans  to  Mobile,  Pensacola  and  Montgomery.  The  Commerce 
Court,  referring  to  a  recent  decision  of  the  United  States  Supreme 
Court  in  a  case  of  the  same  general  class,  said,  "Tested  by  the  prin- 
ciples laid  down  in  that  decision,  we  are  of  opinion  that  the  order  here 
drawn  in  question  must  be  held  invalid,  as  exceeding  the  delegated 
powers  of  the  Commission,  because  there  was  no  substantial  evidence 
to  sustain  it,  *  *  *  having  regard  to  the  undisputed  evidence  ad- 
duced at  the  hearing,  the  existing  rates  were  not  shown  to  be  unjust 
or  unreasonable  and  there  was  therefore  no  valid  basis  for  the  Com- 
mission's conclusion." 

In  another  case,  in  which  the  Commission  ordered  a  reduction  in 
the  rates  on  lemons  from  California  to  the  East,  the  Court  said  that 
the  Commission  dealt  "entirely  with  matters  tending  to  show  the  need 
in  this  industry  of  a  high-protective  tariff  against  Sicily  and,  not  on 
traffic  considerations,  but  to  compensate  for  the  tariff  insufificiencies, 
ordered  a  low  transportation  rate  especially  to  eastern  territory";  and 
that  as  in  the  judgment  of  the  Court  "the  order  is  based  primarily 
on  the  assumed  authority  to  protect  the  industry  against  foreign 
competition,  it  must  be  held  void  as  beyond  the  powers  delegated  to 
the  Commission." 

What  perhaps  is  the  most  important  decision  of  the  Interstate  Com- 
merce Commission  that  has  been  taken  up  to  the  Commerce  Court  is 
that  affecting  the  rates  on  transcontinental  traffic.  The  Commission 
divided  the  country  into  zones,  and  specified  in  percentages  the  rela- 
tion that  the  rates  from  each  zone  should  bear  to  the  through  rate 
from  the  Atlantic  to  the  Pacific.  That  is,  it  did  not  prescribe  exactly 
what  should  be  the  rates  from  the  respective  zones  but  ordered  that 
they  should  bear  a  certain  relation  to  a  through  rate  no  matter  what 
that  rate  might  be.  The  Court  said,  "In  so  far  as  the  Commission 
attempts  thus  to  determine  the  relation  of  the  long  and  short  haul 
rates,  irrespective  of  absolute  rates,  it  goes  beyond  any  authority  that 
has  been  vested  in  it,  for  it  is  not  in  the  power  of  the  Commission  to 
say  that  100  per  cent,  107  per  cent,  or  any  given  percentage  of  an 


]3 

unknown  less  than  reasonable  rate  to  the  coast  is  necessarily  a  maxi- 
mum reasonable  and  a  non-discriminatory  rate." 

These  decisions  are  examples  of  the  jurisdiction  exercised  by  the 
Commerce  Court  to  control  the  action  of  the  Interstate  Commerce 
Commission  when  the  Commission  has  erroneously  taken  action  ad- 
verse to  the  railroads.  The  Commerce  Court  has  also  indicated  that 
it  has  jurisdiction  to  control  the  action  of  the  Commission  should  it 
erroneously  be  adverse  to  the  public  interest. 

Whatever  be  the  outcome  of  the  controversy  over  the  relation  that 
the  Interstate  Commerce  Commission  bears  to  the  courts,  it  must  be 
recognized  that  from  whatever  viewpoint  it  be  considered  the  Com- 
mission is,  under  our  scheme  of  government,  an  anomalous  institution. 
Under  that  clause  of  the  Constitution  which  gives  the  Congress  the 
power  to  regulate  commerce  between  the  States,  and  which  was  in- 
tended to  keep  one  State  from  taking  advantage  of  another,  the  Con- 
gress has  been  considered  to  have  the  power  to  fix  the  rates  of  the 
railways  applying  to  interstate  traffic.  The  delegation  of  this  power 
to  the  Commission,  while  not  considered  by  the  courts  as  a  delegation 
of  legislative  power,  unquestionably  is  closely  related  to  the  legis- 
lative power.  The  power  accorded  the  Commission  to  determine 
whether  an  existing  rate  is  reasonable  makes  it  a  judicial  body. 
Its  mandate  to  see  that  the  Interstate  Commerce  Act  is  enforced 
makes  it  an  executive  body.  Therefore  the  Commission  does 
not  fit  into  our  scheme  of  government  under  which  it  is  ordained 
that  the  legislative,  executive  and  judicial  functions  shall  be 
separate.  This  is  not  to  say  that  the  Commission  may  not  be  a 
useful  institution.  It  has  done  many  useful  things  and  has  the  oppor- 
tunity to  do  more.  This  is  not  to  say  that  although  an  anomaly  at 
present  it  may  not  become  adjusted  to  our  scheme  of  government,  or 
that  our  scheme  of  government  may  not  become  adjusted  to  include 
the  Commission.  Indeed,  as  repeated  decisions  of  the  Supreme  Court 
of  the  United  States  have  recognized  the  validity  of  orders  issued  by 
th'---  Commission,  it  must  be  admitted  that  the  constitutionality  of 
the  Commission  has  been  virtually  even  if  not  expressly  estab- 
lished. As  it  stands,  it  is  engrafted  upon  the  government  and  receives 
nourishment  from  the  same  source  that  vitalizes  the  three  original 
coordinate  departments,  to  no  one  of  which  can  it  in  truth 
be    said    to    belong.      Thus    engrafted    upon    the    government,    the 


14 

Interstate  Commerce  Commission  exercises  a  greater  measure  of 
power  than  any  other  agency  of  the  government,  not  only  over  the 
railways  of  the  United  States,  but  through  its  power  over  railway 
rates  over  the  entire  industry  and  commerce  of  the  United  States. 

As  we  have  seen,  the  popular  and  legal  conception  of  the  relations 
of  the  railroads  to  the  government  has  undergone  marked  changes 
and,  as  we  all  know,  there  is  a  possibility  of  still  more  radical  change. 
The  era  of  corporate  amalgamation  marks  a  transition  in  the  industrial 
and  commercial  status  which  has  found  effect  in  modifications  of  the 
laws.  As  the  problems  developed  by  this  period  of  transition  are  not 
as  yet  thoroughly  understood,  the  laws  to  which  they  have  given  rise 
are  as  yet  incoherent. 

Inasmuch  as  the  railroads  of  this  country  have  been  constructed 
and  maintained  by  private  capital  that  capital  must  be  protected  in  the 
rights  inherent  in  property.  To  do  otherwise  would  impede  their 
operation,  impair  their  maintenance,  and  obstruct  their  development. 
There  is  but  one  way  in  which  the  obligation  of  the  government  to 
the  railroads  as  private  property  can  be  removed,  and  that  is  through 
their  purchase  by  the  government.  The  experience  of  other  countries 
in  the  ownership  and  administration  of  the  railroads  is  sufficient  to 
give  the  people  of  the  United  States  a  long  pause  before  taking  this 
step. 

That  private  property  must  be  used  for  the  public  good  applies  with 
redoubled  force  to  the  railways.  This  does  not  mean,  however,  that 
their  public  relations  may  be  considered  a  basis  for  their  oppression 
by  the  public  any  more  than  their  status  as  private  property  can  be 
made  the  basis  for  oppression  of  the  public  by  them. 


r^ 


UNIVERSITY  OF  ILLINOIS-URSANA 


I  III  II 


3  0112  084206678 


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